Global Economy Journal

Large current account deficits and foreign debt levels remain a source of concern for international financial markets and policymakers. Yet, exactly what an “excessive” external deficit or liability position for an advanced economy is at any time has never been adequately defined. This article addresses the question by proposing new methods for assessing the proximity of current account deficits and the associated foreign debt to their upper bounds. It contends that productive investment fundamentally sets the feasible limit for current account deficits, whereas the capital to output ratio ultimately sets the foreign debt to GDP limit. Benchmark estimates for the United States, Australia, New Zealand and the United Kingdom, advanced economies that have borrowed heavily since 1990, reveal external deficits have usually been well within limits, although recent United States experience is an exception.

This study identifies the pattern of comparative advantage for U.S. regions from actual trade performance as indicated by the industry composition of exports. Revealed comparative advantage patterns are also determined using production data. Dynamic changes in comparative advantage patterns are identified using a methodology developed by Kreinin and Plummer (1994a). Comparative advantage patterns and the degree of structural change in exports vary considerably across regions. Results will assist U.S. regions and states in formulating effective export promotion strategies.

This study tests the validity of the alternative hypotheses in the intra-industry trade (IIT) literature using information on Korea’s trade between 1991 and 1999. The study refines previous studies by breaking down IIT into horizontally and vertically differentiated products, controlling for country fixed-effects, and using more variables relevant to Korea’s industry data. The main results suggest that some conflicting results of previous empirical studies could be caused by the use of the aggregate approach itself. Most of all, variations of the level of IIT in Korea are better explained by vertical IIT. Furthermore, while the hypotheses derived from the theoretical models of horizontal IIT and vertical IIT are generally confirmed by the empirical analysis, the hypothesis of demand similarity was not supported. The results also favor the competitive market structure explanation for both types of IIT in Korea.

The purpose of this article is twofold: (1) to rekindle old debates surrounding the efficacy of craft unionism (as opposed industrial unionism) in the age of globalization in order to provide insight into recent contentions by the Airline Mechanics Fraternal Association (AMFA) regarding the potential for craft strategy among mechanics in the air transport industry; and (2) to present a theoretical framework that combines the process of skill formation and technological change in a consistent and unifying manner. The theoretical framework offered here illuminates the transitory nature and meaning of skills in capitalism. Given the transitory meaning of skills and their extrinsic determination by the fast-pace of technology, to maintain reliance on the intrinsic value of skills alone—as AMFA seemingly does— should invite skepticism.Three global trends are identified that affect mechanics in air transport: the diminished role of major carriers, the change of fleet composition, and the growing use of outsourcing. These developments are discussed and their consequence for skilling and deskilling is examined. These tendencies align with the view that universal labor contingency is an aspect of contemporary globalization. In view of this fact, the article urges labor educator and union activists to carefully evaluate AMFA’s strategy.

The exhaustion doctrine in intellectual property law generally limits the rights of a patent, copyright or trademark owner (“IP Owner”) to control the disposition of an article after the article has been sold by or under the authority of the IP Owner. In theory the doctrine enables the IP Owner to receive fair reward for surrendering its right to withhold a product from the market but thereafter permits free disposition and movement of chattels, preventing IP rights from unduly disrupting distribution systems.Under a strict territorial application of the doctrine, a sale in country A under a country A patent (or copyright or trademark) would exhaust the IP Owner’s rights only in Country A, and the IP Owner could rely on its separate patents in other countries to enjoin sales, seek damages or possibly even require customs officials to halt infringing imports at the border. This principle would hold even though the IP rights in all the countries are essentially the same. A strict territorial exhaustion doctrine is arguably consistent with the nature of IP rights, which are granted by each individual nation as an act of sovereignty and are strictly territorial in effect; while its impact will vary with other trade conditions (relative exchange rates, for example) and across different categories of goods, a strict territorial approach can serve as a barrier to free movement of goods and cause IP rights to act as private trade barriers.Opposed to the territorial principle is the historically more widely applied principle of international exhaustion. Under this version of the doctrine a sale by or under the authority of an IP Owner anywhere exhausts its right under all counterpart IP anywhere in the world. This doctrine has always seemed difficult to reconcile with the underlying systems of national IP rights but avoids the practical problems and trade barriers of a territorial principle.Court decisions in the last few years in three major trading areas -- the EU, Japan and the US – have rejected a strict international application of the exhaustion doctrine for some forms of IP, with the result that sales of some products by an IP Owner outside Country or trading region A do not necessarily prevent the owner from using Country A IP rights to prevent imports or sales there. This is an issue which the major international trade treaties leave to individual signatories’ local law. Subject to possible limits imposed by competition laws in what will probably be relatively rare cases, IP Owners in these three major trading areas may, with greater or lesser effort, now restrict parallel trade and discriminate in sale of some goods between markets with different levels of pricing.These recent decisions, while suggesting some degree of convergence among the three trading areas, do not necessarily correlate closely with the notion suggested by Guzman* (in connection with competition laws) that such legal regimes should be supported by net exporting nations, not net importers. It is possible that as the implications of these decisions become clearer and their possible effects more evident, they will eventually lead to further consideration and possibly further international trade negotiations on the subject of parallel imports.

This paper provides an analysis of the liquidity management of the euro. We tested the influence of five variables (the exchange rate, the price of oil, the EU deficit, the EU interest rate, and the U.S. interest rate) on the euro liquidity supply in addition to the fluctuation of the liquidity supply before and after September 11, 2001. While the literature focuses on the internal European institutional environment, this study looks at the international systemic risks and their influence on the liquidity supply. Ultimately, we come to the conclusion that the ECB’s liquidity supply is affected by international factors.

One major objective of the new EU neighborhood policy is to move towards more trade integration between the enlarged EU and its new Eastern and Southern neighbors, i.e., Russia, Ukraine, Belarus, Moldova, as well as Southern Mediterranean and Caucasus countries. Using recent theoretical developments in gravity models, this paper derives an estimable equation, which particularly focuses on trade costs. This equation is then used to investigate the new neighbors' export potential towards the EU market. For this purpose, several Hausman and Taylor's models are implemented in order to consider the correlation between certain independent variables and the residuals which are used to calculate trade potentials. Results outline that the NNCs' export potential is generally significant, especially for the new Eastern neighbors. However, it seems that this potential is limited for Mediterranean countries, as they have already enjoyed preferential market access with regards to the EU. Finally, an extension of the analysis to Middle-East and Gulf countries also highlights significant trade potentials with the EU.

It is generally acknowledged that domestic investment boosts economic growth, yet the impact of foreign direct investment (FDI) is not as clear, with some studies suggesting the need for a miniumum threshold level of development in order for FDI to be beneficial. In this paper we conduct an empirical cross-country growth analysis to investigate the impact over two decades, of foreign direct investment at the ‘aggregate’ level, and find that it has a significant and positive relationship with real income per capita, irrespective of any human capital requirements. An interesting observation is that the coefficient on the foreign investment variable is considerably larger than that of the domestic investment variable, suggesting a potentially large role for FDI. However, the problem of establishing the direction of causality, compounded by the unavailability of suitable instrumental variables, remains. Thus, at this point, we go no further than concluding that there is indeed, a large and positive relationship between foreign direct investment and economic growth.

This paper analyzes the impact of remittances on child human capital in Mexico. During the 90’s and in particular after the “tequila crisis” Mexican workers increased the remittances that were sent to their homes from the United States. I will analyze the effect of such increasing source of income on child human capital decisions. Contrary to Hanson and Woodruff (2003) the results obtained from Census data indicate a positive and small effect of remittances on schooling only for children living in cities with fewer than 2,500 inhabitants and with mothers with a very low level of education. However its magnitude is not substantial.